Welcome to the first edition of Financial Services Thinking for 2022 showcasing the latest news from the corporate regulators.
We also share a ‘hot tip’ about anti-money laundering and counter-terrorism financing (AML/CTF) compliance reports which are due before 31 March 2022.
Please share Financial Services Thinking with your friends and colleagues, and we value your feedback.
ASIC is reminding directors of listed entities about conducting a high-quality operating and financial review (OFR) and disclosing material business risks in their annual report. All listed companies, registered managed investment schemes, and disclosing entities must prepare an annual financial report and a directors’ report. The OFR forms part of the annual report and is also known as ‘management commentary’ or ‘management discussion and analysis’.
The annual reports must contain information shareholders or unitholders would reasonably require to make an informed assessment of the entity’s operations, financial position, business strategies, and future prospects.
Following ASIC’s recent review of annual reports for FY2021, directors are reminded that discussions around future financial prospects must be balanced and refer to the material business risks to avoid engaging in misleading conduct.
ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247) provides guidance on preparing an OFR.
Contact our lawyers if you have any queries about your financial reporting requirements.
ASIC has released Consultation Paper 357 Remaking relief for business introduction services: ASIC Instrument 2017/186 (CP 357) seeking feedback on proposed changes to the relief for business introduction services. ASIC believes relief for scheme interests continues to form a necessary and useful part of the legislative framework for managed investment schemes, particularly as these entities recover from the impact of the COVID-19 pandemic.
CP 357 follows on from the relief provided under ASIC Corporations (Repeal and Transitional) Instrument 2017/186 which is due to expire on 1 April 2022. CP 357 includes proposals to:
Submissions are due by 15 February 2022. Reach out to our Funds Management team for more information and to understand the design and distribution obligations.
On 20 January 2022 ASIC released Consultation Paper 356 ETP naming conventions: Updates to INFO 230 (CP 356) setting out proposed updates to the guidance on naming conventions for exchange traded products (ETPs).
The proposed revisions aim to simplify the naming conventions and promote flexibility as the ETP market develops.
The key areas of focus and proposals by ASIC include:
Submissions are open until 3 March 2022.
Reach out to our Funds Management team to understand more about ETPs.
ASIC reports an increase in marketing recommending Australians switch from retail and industry superannuation to self managed superannuation funds (SMSFs) and invest in ‘high return’ portfolios. Superannuation is an attractive target for scammers and SMSF trustees are the ‘bullseye’. Scammers target trustees to invest in crypto-asses which are high risk and speculative investments. ASIC reminds SMSF trustees they bear responsibility for the fund’s decisions and for complying with the law – even where professional licensed advice is relied on. Investments must be permitted under the fund’s trust deed and be in accordance with the fund’s investment strategy. The trustee must also consider the taxation consequences for investments, including cryptocurrencies.
You can read more about ASIC’s warning here.
Click here for our recent article explaining Good practice guidelines for REs of crypto schemes.
A key reform under the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act – giving the Financial Services and Credit Panel (FSCP) its own statutory functions and powers – commenced on 1 January 2022. The FSCP's powers include directing financial advisers to undertake specified training, counselling, or supervision and to report certain matters to ASIC. ASIC will proceed to issue a warning/reprimand or make a referral to the FSCP only where it has formed a reasonable belief after carrying out its usual triaging, investigatory work, and referral processes. This means not all concerns about the conduct of financial advisers that come to ASIC’s attention will result in ASIC issuing a warning/reprimand or a referral to the FSCP.
ASIC will consult on guidance regarding the operation of the FSCP in early 2022.
The Federal Government intends to extend the AFSL regime to cover a wider range of proxy adviser activities, and require proxy advisers to be independent to their institutional clients. Treasurer Josh Frydenberg and the Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume, announced on 17 December 2021 that this will be achieved through the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021.
The licensing extension and the requirement to provide copies of proxy advice to companies will commence from 7 February 2022, with the new independence and superannuation voting disclosure requirements commencing 1 July 2022.
Our team can answer your questions about the regulatory landscape and how you should structure and operate your funds management business.
Anti-money laundering and counter-terrorism financing (AML/CTF) compliance reports are due from 1 January to 31 March 2022. This compliance report covers important areas of AML/CTF and assists AUSTRAC understand how each business complies with its obligations over the year, and where additional support or guidance may be needed.
Most businesses need to complete a report. However, some businesses are exempt from these obligations which you can read about here.
Reach out to our lawyers for more details about your AML/CTF reporting obligations.